The Five Dumbest Things on Wall Street This Week: Oct. 26

Friday

Thank you Bob Benmosche. From the bottom of our hearts, thank and God bless you.

Why, you are probably wondering, are we heaping such a generous dose of gratitude upon AIG's (:AIG) CEO?

Certainly it's not because he demanded it during a megalomaniacal rant in Monday's New York Magazine. To be honest, that article gave us more of a sense of agita than appreciation.

No, it's because Bob made our Dumbest legwork so much easier this week. Seriously, it's not easy finding these pearls of witlessness week-in week-out, so it's a major relief when a gem like this falls into our proverbial lap.

Speaking from his villa on the banks of the Adriatic, Benmosche bemoaned the lack of gratefulness from Uncle Sam for repaying with interest the more than $182 billion in taxpayer funds used to bail out the failed insurer during the depths of the 2008 financial crisis. (Well, to be precise, AIG has paid back the Fed in full, but not yet the Treasury which still owns about 15% of the company. But it's close, so let's not further upset the bearded Benmosche by splitting facial hairs.)

"Neither of them have ever said 'Thank you?' We have done all the right things. Somebody should say, 'By golly, those AIG people made a promise and they are living up to a promise!' We're left with a major part of the economy in America; they're going to make a profit on top of everything else they've got," said Benmosche from his Croatian castle, adding with a flourish, "God bless America. And God bless AIG. And God bless Tiny Tim."

Yes fellow citizens. You read correctly. The guy that pocketed $14 million in 2011 to help clean up the toxic mortgage bond mess created by folks that pocketed $165 million in bonuses for creating said mess wants us all to thank him.

Oh man, that's just audacious Bob. We acknowledge you did a stellar job in helping raise that Titanic of a company. But let's not go overboard and equate your savvy financial engineering with some kind of national heroism. In case you may have forgotten, you are Bob Benmosche, not Ben Freaking Franklin.

They say chutzpah is best characterized by a person who murders his parents and then pleads for the court's mercy on the grounds of being an orphan.

Well, in case we needed one, Benmosche's plea for gratitude has given us another very fine definition for the term.

We suppose we can thank him for that as well.

4. Insulting AMD

Okay, we admit it. We here at the 5 Dumbest may be overly sharp with our barbs at times, and our commentary can occasionally be a tad too malicious even for the thickest-skinned Wall Street warrior. So for all those folks out there who we may have offended -- knowingly or unknowingly -- by stretching a joke beyond its breaking point, please accept our humblest apologies.

We repeat. We're very, very sorry if we went beyond our Dumbest mandate and were unreasonably unkind to you. And by "you," we're talking about all our past targets, not just those overpaid do-nothings Dick Parsons and Robert Rubin at Citigroup.

All that said, it must also be noted that we aren't the only flamethrowers out there. Not by a long shot. Take Bernstein Research's Stacy Rasgon for example. His jabs at AMD (:AMD) late last week after its disappointing earnings report were as -- if not more -- vicious than any punches we've failed to pull.

The chip maker said revenue in its third quarter fell 25% since last year to $1.27 billion, yielding a loss of 20 cents a share. Analysts, for their part, had penciled in a top-line total of $1.28 billion and a loss of 13 cents per share. The company also announced plans to reduce its workforce by 15% on account of problems in the PC industry and swallow a restructuring charge of $80 million.

AMD CEO Rory Read attempted to spin the news as much as he could saying, "It is clear that the trends we knew would re-shape the industry are happening at a much faster pace than we anticipated. As a result, we must accelerate our strategic initiatives to position AMD to take advantage of these shifts and put in place a lower cost business model."

Hey, what do you expect the guy to say after seeing his stock decline 60% so far this year to just a shade above two bucks? What more can he do when the PC market is in the crapper? In this case, even our admittedly hard hearts go out to the guy.

Not Stacy Rasgon's at Bernstein however. No, Rasgon, who apparently cheered the stock all the way down like he was riding a flume at an amusement park, splashed water on Read's plans Friday while cutting his rating to "market perform" from "outperform."

"Frankly, the most common adjective that comes up when we discuss the company with clients is, simply, 'un-investable.' We are now believers," spewed Rasgon, who also slashed his price target to $2.50 from $4.

Ouch! That's harsh even by our standards. And that wasn't the entirety of Rasgon's self and AMD loathing.

"We acknowledge the risk of downgrading at what appears to be a bottom (indeed, we have done it before with this name) but we truly have zero conviction in the name," added Rasgon.

Imagine that. Supporting a stock all this time and then being so spiteful as to call it 'un-investable.' To be perfectly candid, that's beneath even us!

Okay. It's not. But you know the old saying: Misanthropy loves company.

3. Goldman's Conviction

What's the difference between a "buy" and a "conviction buy" at Goldman Sachs?

Well, as far as we can tell from its maneuvers in Monster Beverage Corp. (:MNST) this week, it literally is "conviction" in both senses of the word.

Bear with us.

Shares of the beverage maker, which sells super-caffeinated drinks such as Java Monster, Monster Rehab, and X-Presso Monster, sank 10.5% to $41 Tuesday, after Goldman analyst Judy Hong yanked the company from its high-profile conviction buy list. Hong made the move after the Food and Drug Administration announced Monday that it was investigating reports of five deaths linked to the company's drinks.

Monster is also being sued by the family of a 14-year-old Maryland girl with a heart condition who tragically died after drinking two cans of Monster in a single day. For those unfamiliar with Monster's eponymous energy drink, it comes in 24-ounce cans and contains 240 milligrams of caffeine, or about seven times the amount of the caffeine in a 12-ounce can of regular Coke. (Oh man! We get a headache just thinking about it.)

Not that Hong's conviction has helped the shares that much. Since she added it to the conviction list on January 16, Monster's stock had fallen 5.7% vs. an 11.2% surge in the S&P 500.

"While the FDA has yet to establish a causal link between these deaths and the drink, we believe MNST shares could be range-bound in the near term," analyst Judy Hong wrote in the note. She did, however, maintain a "buy" rating on the stock, saying that following Monster's massive selloff, regulatory and legal risks are already baked into the stock's price.

As to the difference between a "buy" and a "conviction buy," we guess it has something to do with emphasis, but to be honest it seems purely semantic to us.

For that matter, the Monster downgrade, if that's what it was, seems to be a matter of semantics as well. According to Hong's logic, if the Maryland girl's family fails to get a conviction in its case against the company, then Hong will get her conviction back in the stock.

You know what? Simply thinking about that notion gives us an even bigger headache.

2. Ready, Apple, Fire

The tech world screeched to a halt Tuesday when Apple(:AAPL) unveiled its new iPad Mini. Zynga(:ZNGA) CEO Mark Pincus, however, kept on firing.

Literally.

As Apple's marketing chief Phil Schiller was striding across the stage in San Jose, holding aloft the new iPad Mini to the enraptured masses as if he was Moses presenting the Ten Commandments, Pincus was busy making moves as well, although in a manner far more ungodly.

Using Apple's event as cover, Pincus laid off 5% of the company's full-time workforce, or about 150 of Zynga's 2,900 workers, and shut its Boston office. The company, which has seen its stock plummet almost 80% since its high profile IPO last year, also plans to "sunset" 13 unspecified older titles, said Pincus in a staff memo on Tuesday.

"This is the most painful part of an overall cost reduction plan that also includes significant cuts in spending on data hosting, advertising and outside services, primarily contractors," wrote Pincus, who added that the cuts at the FarmVille maker would presage "more stringent budget and resource allocation around new games and partner projects."

Pardon us Pincus, but you must admit that "painful" is a relative term. Clearly the pain you are referring to is being felt more acutely by your fleeced shareholders and recently canned workers than yourself. We seem to remember you selling about $200 million in stock earlier this year, an amount that should surely dull any or your personal proverbial pain.

And as for that "more stringent resource allocation" of which you blog, we guess that means you will think next time before playing games with shareholder money like your disastrous $180 million purchase of game studio OMGPOP in March. That acquisition was written down by $90 million this month.

Shares of the company momentarily popped Wednesday morning on news of the layoffs, presumably because Wall Street typically cheers any firings other than their own. And the stock jumped even higher on Thursday, touching $2.50 a share, when traders used the company's better than expected Q3 revenue number and U.K. gambling deal as a buying opportunity.

But it was Pincus' opportunistic use of Apple's event to perform his own dirty work that really peeved the gaming community. Apparently for gamers, firing folks during an Apple product launch is a worse social foul than scheduling a wedding ceremony on Super Bowl Sunday.

Ian Miles Cheong, editor-in-chief at Gameranx.com, for example, tweeted at the time, "Zynga just fired over a hundred people, giving them two hours to clear out their desks. They did it during the Apple keynote to avoid press."

And Cheong was not alone in questioning Pincus' timing. Indignant tweets about Zynga's iPad Mini-massacre lit up the gaming community, leading us to think that the next time Apple launches a gadget then Zynga's remaining employees better run for safety.

One more Mini and it could be a big game over.

1. Sorry Greg Smith

Don't go anywhere just yet Greg Smith. Before your 15 minutes of fame expire and you move onto your next adventure, whatever that may be, we owe you an apology.

Back in March, we ridiculed Smith, the Goldman Sachs (:GS) salesman turned Wall Street turncoat, in a Dumbest entry titled "Farewell Cruel Goldman." In case you missed that particular week's list, we took Smith and his goodbye missive to task, mostly for the obscenely public nature of his quitting via the New York Times op-ed page.

We believed then, as we believe now, that if he was intent on walking out of the white-shoe firm after 12 years on the job, then he should have simply informed his human resources manager as opposed to a national newspaper with an ax to grind against his employer. Smith may have been shooting for a Jerry Maguire moment at the time, but instead he shot himself in the foot, primarily because nobody has much sympathy for a person voluntarily quitting an extraordinarily high-paying job in an era of mass layoffs unless they have a really good reason.

Let's be honest big guy, bemoaning "the trajectory of its (Goldman's) culture" does not qualify as a good reason. Not even close.

And judging by the response this week to Smith's press tour in promotion of his book, Why I left Goldman Sachs, a book for which he reportedly received an advance of $1.5 million, the skepticism over his departure -- and the hoopla made over it -- remains. Nevertheless, we heartily disagree with the latest round of Smith-bashing in the wake of the book's publication and his appearances on 60 Minutes, The Today Show and the like.

The main criticism about the book is the lack of a bombshell revelation or any strikingly new information about Goldman's misdeeds. For example, in the same paper that published his going away letter, financial writer James Stewart summarily dismissed it saying, "There were no examples of a toxic culture at work, no actual names of morally bankrupt people and no examples of a client getting ripped off."

Come on Jim. What were you expecting, that Smith was going to give you Lloyd Blankfein in the conservatory with the toxic mortgage bonds? Get a clue. That's the stuff of whistleblowers and Smith is clearly not a whistleblower. Misdirected, ego-driven schmuck? Yes. Whistleblower? No.

Think about the mammoth rewards he could have collected if he actually came up with something really juicy about Goldman. A whistleblower at UBS just nabbed $104 million for spilling the beans. If Smith had anything really good, the sky would be the limit considering Carl Levin's contempt for Goldie.

Ok. Here's the apology part.

Although Smith is not technically blowing the whistle on Goldman does not mean we should totally ignore his tune. However misguided Smith may be, he's heading in the right direction. Goldman Sachs must have done something wrong during the credit bubble or else they would not have paid a $550 million settlement to the Securities and Exchange Commission. If you think they ponied up all that cash because they felt a sense of remorse then get another clue.

Right now, the only Goldmanite in the federal government's crosshairs is the "fabulous" Fab Tourre, who goes to trial for his mortgage misdeeds next summer. Tourre, an executive director who barely outranked Smith in the firm's hierarchy, is still the firm's only person facing the heat over the hundreds of billions of dollars lost during the financial crisis. To us, that's criminal.

Is the Goldman omerta really that strong that not a single high-ranking executive at the firm will break ranks and tell the truth about the firm's bad behavior? Will regulators -- and the American public -- forever be relegated to being, to borrow Smith's term, "muppets" of Goldman's inner circle?

Sadly, that seems to be the case. And as we move further away from the financial crisis it will become even more so as more files get shredded, more hard drives get deleted and more memories get faded.

On that note, we apologize to you Greg Smith for your recent mistreatment. You did the best you could do. It's not your fault that you couldn't move the ball further downfield and offer some harder evidence to please your critics. As we all know by now, you rose as high as you could at the firm. Unfortunately, you just couldn't reach the rung where you knew anything worth knowing.

Then again, had you risen any higher, you probably wouldn't have shared the juiciest stuff anyway.

--Written by Gregg Greenberg in New York.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.